Good morning, everyone, and thank you for waiting. Welcome to Banco Brasil First Quarter 2020 Earnings Conference Call. This event is being recorded. [Operator Instructions]. This conference call is also being broadcast live via webcast through Banco do Brasil website at www.bb.com.br/ir, where the presentation is also available. The replay of the conference will be available to the form number of +55-1-121-880-400 until May 15, 28, English and Portuguese. To access the replay, please ask the operator to listen to BB's conference call. Identification will be required. Participants may view the slides in any order they wish. With us, we have Mr. Carlo Muto, CFO and Mr. Daniel Maria, Head of Investor Relations. Mr. Daniel Maria, you may begin now.

Okay. Thank you, Operator. Good morning, everyone. Thank you for attending the call. I hope that everybody's well and safe. Let me start the presentation on Page 4. Page 4, we bring the earnings highlights. First of all, for 2020, we tend to have an impact coming from the new coronavirus, COVID-19, and we expect some impact. In this first quarter, we observed it mainly presently credit provision that we did in the total of [indiscernible] BRL 2 billion. The improvement imply in growth in the credit provisions of 63% when we compare to the first quarter '19. The impact of this was in the adjusted net income, we had a reduction of 20% reaching BRL 3.4 billion in the adjusted America. For the other metrics, for instance, NII, we observed an increase of 9.9%, reaching BRL 14 billion. The fee income, we reached BRL 7.1 billion, an increase of 4% in comparison to the first quarter '19. And administrative, we had a growth below inflation 2.7%, reaching BRL 7.8 billion in administrative expenses. Now moving to Page 5 we bring the net income and profitability. As I said, we delivered BRL 3.4 billion in this quarter. This analyzed represents 12.5% return on equity and return on assets of 0.8%. Probably another way to look at results is to look at the pre-provision operating profit. In these metrics, we exclude this movement -- prudential movements in the PAT provision. Yes, we saw an increase of 15.4% when we compare to the first quarter '19 and 7.8% in relation to the fourth quarter '19. This shows that operationally, the banking including product numbers. We can move to Page 6 that we bring the more description of the NII. So we have quite resilient NII, it grew 9.9%, as I said,in comparison to last year and the reduction of 1.8% when we compare to the fourth quarter. And this is mainly due to the structural -- to the structure of the assets and liabilities that we have. For instance, we had a reduction in the base rate of about 30%. Our funding costs is following these the trend of the base rates, reducing the cost of in 30.2%, mainly because the liabilities, the net position is slowing. The treasury results observed an increase of 6.3% when we compare to the first quarter. However, we see a reduction in comparison to the fourth quarter, and this is mainly due to the new tax -- to the new interest rates. And we see some decrease in the lower operations revenues. This is a consequence of the new base rate in the economy and also some products, for instance, the our truck facilities that we have, new regulations limiting the interest rate that we charge for it, that we are going to discuss much more ahead. Now we can move to Page 7 That We show the credit provisions. And I would like to highlight in the first quarter this prudential credit provisions that we presently adopted. This represent BRL 2 billion, and this implies an increase in the cost of risk moving from 3.15% to 3.41%. We can go to Page 8, that we show the behavior of the NIM and the spread the credit spread for the portfolio. Yes. First of all, we see a reduction in NIM from 4.37% to 2.24% when we compare fourth quarter to the first quarter '20 and see an increase when compared to the first quarter of '19. We have different trends the movement from 3.97% to 4.24% is that movement that we were in the process of changing mix going to lines that shows better profitability. However, in the fourth quarter, we have [indiscernible] that expense, that is basically the gap that we have for the overdraft facility that impacted the credit portfolio, as we show in the right-hand side of these slides, yes. I see constance that the credit spread that we have for the portfolio movement from -- not prespend, but the portfolio spreads moving from 8 19 to also to OTE loan operations for the total portfolio. And when we look at the spreads separate by segment, we can observe that the contribution of this reduction came from in the videos portfolio, and this can be explained by the capitalist as I said. Yes. Also for the need coming back to the left-hand side of the slide, you have also reduction in the treasury that I mentioned previously. The adjusted NIM -- risk adjusted NIM, can be explained by the higher credit provisions that we made in this period experience these potent. We can move to Page 9. On Page 9, we bring the loan portfolio. We have an increase of 5.8% relative to March '19 and an increase of 6.5% when we compare to December '19, yes? By the way, when we compare March to December, yes, we have an increase of BRL 45 billion in the loan portfolio, BRL 22 billion can be explained mainly by the FX devaluation. We have some portfolios that we are referenced in FX, for instance, the portfolio growth, for instance, we have also the government portfolio that we are going to discuss ahead. And some of the highlights that we have also in the growth is the growth of the SME and Visa portfolio. By the way, those are real reference. There is nothing to be foreign exchange. Also, something I would like to highlight is the block trade part of this or that or the company's portfolio. We have an increase in this first quarter '20, and this is basically due to the dynamics of capital markets as we're going to discuss a little bit ahead. Moving to Page 10. We individuals loan portfolio. As I said, a growth of 9.6% in this portfolio. Some of the highlights of this is the growth in the payroll loan of 16.4% March on March, yes. And the consumer finance that we observed an increase of 36% is, by the way, that ports in the Board yes. 41.5% of the loans originated in the first quarter '20 were made through the end. This shows the penetration of the digital solutions for this product. Moving to Page 11. We bring color in the company's loan portfolio. First of all, as I said, we had mainly an increase in the December compared to March '20, yes. This increase can be explained by the company's portfolio, yes, companies with revenues above BRL 200 million that is the great part in the portfolio. This movement is basically because we have been servicing those customers through capital markets as the capital markets shutdown, yes. Certainly, there is more demand in Brazil provided credit to our customers, but we understand that as soon as the capital markets opens again, those loans tend to migrate to get at the moment. And finally, just some highlights in the SME portfolio. We show the yellow part, the Board, yes, we open here on the right-hand side, how is the growth of this portfolio with some observations about the composition in the short-term profile of this portfolio working capital. Now moving to page -- to the next page, Page 12, we bring the other business, we own portfolio. We have 2 -- basically 2 dynamics here. The total portfolio, including the agroindustrial, we see a reduction year-on-year from BRL 187 million to BRL 186 million however, this basically can be explained by the dynamics of the agroindustrial. That's quite similar to what we observed in the large corporates, growing much more to capital of and so on. And when we look at the [indiscernible] loan portfolio, we see a growth from BRL 169.2 and BRL 73 billion, yes. And this participation, this BRL 173 billion in the GE loans represents a market share of 64.2% in this market. Just some highlights about the performance of this first volume. First of all, the CPRS, it's a rural product bills, it's a negotiable sent guaranties grew in this portfolio by 60.2% when we compare March '19 against March '20, and 80% of the transactions done in the first quarter '20, were done due to mobile, showing that more products that we have a high penetration in the digital [indiscernible]. And another highlight is the growth in the working capital, 3.9%. And by the way, 50.1%, 52% of the working capital that we have is insured by -- has any sort of metates web insurance or price insurance or whether. Moving to the next page, Page 13. We bring the credit portfolio. By the way, we saw a reduction in the NPL at 90 days. We reached 3.17%, including the specific case that we chapter 11. Yes. This is below the industry that reached 3.20%. When we look at these metrics through the coverage ratio, we reached 200% in coverage ratio against the system that went down to 193%. Moving to the next page, Page 14, we bring the credit quality by bus segment. Yes. First of all, we have the individuals portfolio, we show some growth in the NPL plus 90 for this segment. That gives us a funding coverage with 199%. Company's portfolio so far, we see a downward trend, which increases 2.83%, including the restructuring case, yes, when we exclude this lower and in terms of coverage, we see growth in the coverage ratios, reaching 283%, considering the case. Yes. And the same for agribusiness that we saw the NPL reaching 3.75% in yes and have presenting a good coverage for the industry, not for the industry, but for this segment. With at 14%. Moving to the next page, we present the new NPL. During Page 15. On the bottom part of the Board, we show the new NPL format in each quarter. By the way, we didn't show here the exclusion of the specific cases that we had in the second quarter and third quarter that explains quite higher, yes, what we show here in by segment in the dotted line. Yes. And we show also the coverage ratio for the new NPL, and we see above 100%, and mainly this quarter, 126%. Next page, Page 16, we bring the fee income. We had an increase of 4% the first quarter '20 compared to the first quarter '19, and we bring some highlights of some lines [indiscernible] issues in the initial stations, administrative expenses grew 2.7% below inflation. Just observe that personnel expenses grew almost inflation. And this having an increase of the personnel bold inflation, but this shows the cost control and the measures that the bank did to mention it. In terms of the fee income to administrative expenses, we reached 93%. And by the way, something to highlight is the concern about efficiency and cost control with sustainability. By the way, in the first quarter, we had the inauguration of the first solar plants, that the bank buys this product business. This brings efficiency in terms of the reduction costs and also moves to the energy metrics of the bank towards a more clean synergy. This is the only first step in others that are in process. Moving to Page 18. We bring the [indiscernible] the CET1. CET1 was almost stable when we compare to the next -- to the last quarter. And in the bottom port, we bring just the building blocks of this. We are just highlighting, we have consumption coming from the from RWA, yes, about 84%, actually, 84% -- 84 basis points. We had also some gains, some increased in capital coming from a resolution issued by the regulator that a loss that some tax credits will not be reduced from the capital base. And we have also the repricing of the actuarial position that contributed with the 1 basis point in the capital. Then this way, we have almost a flattish movement for the capital. Yes. Just to get some time to speak about the digital process. Yes. By the way, we have been investing a lot in the digital experience of the customers and the digitalization of the process. This is a consistent process, and we have been talking a lot with you all about this. And by the way, our app consistently is the best evaluated app in the Brazilian system. And then we have been doing -- we have been delivering this in the last years with a quite sizable number of evaluations. And also, we have a strategy of having omnichannel approach for the products in a way that you can reach the customers in different channels and you can mention this. And also, all those investments that we have been doing the last years certainly put us in an unrivaled position, at the moment, we want to offer to our customers a remote service, yes. And just some examples. Yes. Our transactions made by [indiscernible] Internet that used to be 80% -- 81%, reached 84.5% in the first quarter. All other initiatives that we have and just an example, we issued 6 million credit cards with NFC in addition to the EPO pay and [indiscernible] that we have, and we are seeing growth in the usage of those products. And also the digital accounts that we saw increase in the digital accounts. By the way, we reached 4.5 million-ish accounts since the we established this product. The banks is offering a quite good condition to present services to our customers in this moment. And moving finally to Page 20, I just bring some highlights of Brazil, in this pandemic situation. By the way, Brazil is an institution with more than 200 years. Yes, we have more than 70 million -- and actually, to be precise, 70.9 million customers. We present -- we are present in 98.9% of the municipalities with 62.5 thousand points of service, branches and the shared services that we have with the products. We have more than 97 thousand people working with us. This doesn't change the suppliers or the third quarter service providers and also the serve the people that we service through Banco do Brasil has a quite relevant position in the Brazilian company in Brazilian Society, we understand this role. And mainly we are social responsible company. And many in this situation is one -- we understand all this possibility in this process. By the way, in the management report, we bring more color about all the actions that we have been taking to the different stakeholders in the society. And just pointing out some of the things that we did for the customer centrality in the customers and many them at those moments, having the relevant of a large institution in Brazil, providing services in the different parts of the country. Certainly, we are channeling to digital service, however, some of them, they need to be done face-to-face. And we are doing this very responsibly and taking into consideration the security of the employees and the customers, yes. And the credit extension in this product in this moment and being closer to the customers is another important aspect in terms of the relationships with the customers. And just an example, how fast back adjusted itself. For instance, we used to have a product in observe through was we showed more than 10 million services on in going through this and what disrupting the cost of service, even though you have some restrictions social isolation. Yes. When we go to the employees, safety is another aspect that the bank took several measures, for instance, identifying the risk groups or isolating the risk groups, finding ways to service remotely. We replace it almost 1/3 of our employees working through home office. And this is only some of the initiatives we did exactly to take into consideration those assets. And certainly, the social initiatives of the bank in the nations through our foundation, FBB, that has several important social impact aspects yes. And also, it's important to preserve capitalization and liquidity. And this is a relevant aspect that we are monitoring. By the way, our BPO management in its meeting every day. Exactly to fine-tune all the measures that are necessary, and we are presenting quite good flexibility in this process. And finally, we move to Page 21 that we showed the guidance. By the way, we suspended the guidance as we have more clarity about the variables to project the results. Yes. And just to highlight some of the expectance the credit provision. That we expected in the interval of -- in the range of 10% to 13% -- BRL 13 billion. We delivered almost half of this in just the first quarter. Yes. And certainly, this impacted the adjusted net income, yes, that came lower compared to this. And the other metrics, some of them are more less affected. Saying that, we can move to the Q&A. And thank you for the attention.

[Operator Instructions]. Our first question comes from Victor Schabbel from BBI. .

Daniel. Thanks for the opportunity. So we have spent a lot of time during the Portuguese call discussing the impacts of the actuarial gains of Banco do Brasil equity but there is 1 point, a thing that impacted most of the banks, all the big banks during the quarter, and I think people overlooked a little bit, which was the fact that mark-to-market of available for sale securities have basically weighed on the equity, impacting negatively all the banks during the quarter. And I would like to understand the drivers behind of it because available for sale securities available for sale in the bank's balance sheets are basically debentures, right? So are basically credit risk. Usually, high-quality credit risk, which are being only mark-to-market because the rates move up during this crisis. And if there is no problem, right, regarding the credit quality of these usually AAA securities we would probably have a positive impact when the rates normalize again. So just wanted to understand if this is the case, if we are talking about the impact of BRL 1.7 billion negative during the quarter is about the repricing or mark-to-market of the debentures and if these debentures are really long-term and are really high-quality or if there was any other securities that weighed on the equity as well?

Okay. Victor. I, frankly, we had some impact mark-to market see on Page 18, about 26 basis points. Our security portfolio has -- doesn't have a larger concentration of private securities. I'd say that most of the mark-to-market came from the product securities. Since you had some shocks, yes. But the concentration, the participation of private securities the case to the bank is not so large. We have, for instance, the case of the portfolio in debentures, about BRL 25 billion, yes. And just to give you the reference in terms of mark-to-market, we had mark-to-market for private securities of BRL 1.5 billion. And for the public securities, it was around BRL 706 million, about the credit quality, there, they have good credit quality. Actually, what happens is that we have a shock in the market. And mainly the prices of those assets certainly had some impact. But credit wise, this is not a major concern for us.

Our next question comes from Giovanna Hoge from Bank of America. .

I have two questions as well. The first one is related to the NIM. You had a benefit in your funding cost related to the decrease of the ICA deposit costs. So all the impact happened already in the first Q? Or should we expect further impacts going forward? Also on the NII, how do you expect it's evolved through the year, taking into consideration the change in mix that we should probably see going forward. And my second question is regarding the NPL formation. Can we expect the NCL formation covered to continue to be above 100% as NPLs will probably take longer to appear given the grace periods you are offering to your clients. So should we continue to see you provision ahead of NPLs.

Okay, Giovana. Thank you. Let me start with the NIM and the NII behavior. As we said since the -- when we started -- when we deliver the guidance for this year, 1 major contribution for the NII would come from the funding side, and certainly the [indiscernible]. Yes. We made some renegotiations last year with important courts, yes. This decreases the cost of adjustment, the cost to the real, and this is one of the positive aspects here. I would say that we got part of this benefit, probably have some more to come, but it's liner, yes. Probably in the next quarter, you're going to see more impacts mainly in the second quarter coming from the reduction in the base rate. By the way, just to give back information about this tradition deposits usually, we negotiate in a long term deal, and we had some contracts that we hired -- we regretted in the past, considering some scenarios of Selic rates with a fixed company. At the moment, the Selic rate starts to go down, down, this fixed component starts to gain more development in the cost. And for that basin, the cost of [indiscernible] well and what we made is basically a negotiation in bringing economic equilibrium [indiscernible] and bringing some this compensation as a percentage of the variable costs of the Selic rate and this is basically the dynamics for this year. But in certain, yes, this will help NII, and this will help needs as we expect. On the other hand, the -- we have some aspects that probably could put some pressure in, certainly, at the base rate, yes. And this goes straight to the treasury results. Having less strategy results, yes and certainly, we expect to have lower treasury results relatively to the historical numbers, because the rate is much lower. This tends to reduce certainly. Just reminding that 2019, we had a threshold much higher than our historical numbers. Then we expect for 2020, a lower treasury even compared to the historical numbers, yes. Then this some of the assets that it certainly brings to different dynamics for NII. But just fine-tuning some perspectives that I have the opportunity to pass to the market previously that we have been expecting means and for the year from stable to gradual increase. Adjusting this perception, we expect news for 2020 from stable yes to gradual reduction. This depends on how those variables will behave, certainly because we have some structural positions as the asset and liability positions of assets at fixed rates and liabilities at slowing rates, yes. At the moment, the base rate goes down, then certainly, we can't -- this benefit means. But this depends on how fast the asset will be repriced. Then this goes to the first question and the importance of the restructuring of those contracts for the behavior of our margin. Secondly, about NPL, what we can expect of NPL. Canton Brasil is conservative in terms of managing and I think what we showed in the first -- in the first quarter is a good proxy on how we see this. Because once we did, we anticipated some of the impacts, because looking at our balance sheet, NPLs were behaving well, yes? We are expecting increasing the NPL, certainly, because these NPL represents the reality of 90 days ago, and the impact of COVID-19, it's not fully -- was not given in the balance sheet. And what is intensifying to anticipate as we did part of this in more anticipation, you can expect then probably in the past, is a good proxy on how we can look at the management of the bank in a very prudent and conservative way ahead. Did I address your point?

Yes.

[Operator Instructions]. Your next question comes from Tito Barba from Goldman Sachs. .

Daniel. A couple of questions. I guess, following up in terms of asset quality and provisions. I know it's hard to say how bad things could get. But just to put into perspective, right, if we look at the cost of risk this quarter was around 3.5%. If we look back at prior crises, right? Looking back in 2016, I think the cost of risk peaked at around 4.7% in early 2016. If we go back a bit further to like 2008, 2009, the cost of risk maybe keeping 4%. How do we think about this crisis in comparison to previous crisis and how much cost the risk and MPLs can increase? If you can maybe give some color at least to put in perspective, would be helpful. And then I have a second question on loan growth asset.

Okay, Peter. First of all, it's hard to create parallels to this shock. Because certainly, there are components that we've never seen as this, yes. For that reason exactly for that reason, we sustained the guide yes. Surely, we have our internal metrics. We are following after the behavior of those metrics, but it's hard because the variables are changing every big for [indiscernible] every day, yes. And then this makes quite difficult. Yes. But probably I can answer your question just showing what are the differences in our portfolio. Yes? First of all, we have a portfolio that is more defensive a relativity to the portfolio we had in the past, including, we understand that relatively to the [indiscernible]. First of all, we have 25% in agribusiness. The perspectives of the business are quite well. Prices for the main commodities is behaving well. For those ones that they had some reduction. This was compensated by the tax yes. And looking at the costs of the producers that are either in dollars or even dollars, but they were locked with the lower dollar or even in real that is even better. Yes, margins tend to be quite yes. And for the molecules that you have, certainly, we have ways of editing this. And this is not a real aspect, but only Banco do Brasil has this portion this composition of the portfolio. When we go to the individual portfolio that represents the other 1/3 of the core to portfolio. Our [indiscernible] had increase in the participation of the non-payroll loan business. Yes, we have 1/3 of this individuals portfolio comprised by [indiscernible] loan. And just reminding that roughly 90% of at this portfolio is Previ loans to public service that we have profitability. Yes. Then certainly, the biggest risk we have in this scenario is unemployment or increasing. And for these, in a certain way, we have some initiation for this process due to the structure. Yes. And when we go to the company's portfolio, comparing to 2016, for instance, we had the larger portfolio, and we had some concentration in some groups. And we have lower portfolio, we decrease this portfolio with cleaning up this portfolio in the last years. We started growing this portfolio last year yes. And the companies that are in this portfolio, we have long-term relationships with them. We know them very well in a different risk profile compared to the past. And in addition to this, we have a quite good guaranteed package for those business, yes? Then saying that, I think that is a quite important asset just to say that we are in better shape for facing this slide. Yes. Even when we consider concentration, you can look at the concentration of groups that we used in the last years. Another important information in terms of collateralization of security. Roughly 65% of our portfolio we have guarantee is comprised by companies with guarantee. And we have additional a 15% that we have in sort of caters, then only 20% of this portfolio, we have no bank. Again, we see a very serious shock in the future. NPL tends to go out -- to go up, yes in the system. But we understand that we are quite well prepared for this moment, even comparing to the last moments, yes. Then this is basically -- although we don't have the final numbers, this is our perception, quite we understand that we are -- I don't think we did it but more prepared for this scenario. Did I address your point.

Yes, I think that's very helpful to put in perspective. Okay. And then my second question on loan growth, right? As expected, your corporate loans went up quite a bit. In the quarter, but you're still growing your loan portfolio less than protective tears. So just to think about going forward, how we might see your loan growth evolve, right? I mean, some of that was just corporate seeking liquidity. So that demand or it goes away. But you also facing any pressure from the government to lend more, thinking about your loan growth compared to private sector bank, could you see a scenario where you start to increase I will a decrease going forward? Or just help us with your kind of your loan growth outlook in perspective given the environment and the moving products would be helpful.

Okay, Peter. First of all, the corporate governance of the bank is quite strict. And the decision that we take our business decisions. Although we are controlled by the government, having 50% of the shares. We have the other 50% comprised by more than 500,000 shareholders. And the corporate governance of the bank is put us much more as a corporation. Then I would say that the decisions taking on business decisions. And by the way, another thing that is important be more about the corporate governance of the bank. We have 8 Board members. From the 8 Board members, we have 6 core members that -- sorry, 5 board members that they are indebter members, yes. Then this shows how important is to give -- to insulate distribution on those aspects that you mentioned, yes. About credit growth I would say that, first of all, we had part of this credit growth that is a consequence of the FX movements as I describe it, yes. But when we look at basically the growth that we are observing, we observe it in the SME and the individuals. It's quite consistent on what we have been presenting into the markets. The difference in this quarter was basically the growth for the large corporates. But this we see as -- I don't see an opportunity, but as a situation we saw in the market. In the end, the large corporate, so the companies, the large companies or medium sized companies the customers. The difference is we have been channeling those credits to get the [indiscernible] because it's for it was more cost effectively for the customers. And for the bank strategy, we move it from a balance sheet business towards the business. As the market shut down, such as they continue to be our customers, they have their needs, and we are a relationship bank. We saw an opportunity to fill the gap for those customers. Yes. And however, this is important, including to guarantee that we are present in the non-base in the future when they come back to the market. This is consistent with the strategy of the bank of relationships. How we -- again, I know that it's hard to talk about the future, yes. But some of the aspects that we can expect about the dynamics of the credit portfolio, it didn't change the approach to increase the participation of [indiscernible]. It's only temporarily that we had this situation. We expect that this will flow back to the capital on. It's hard to say if this is going to be in the second quarter, third quarter or fourth quarter. But at some time, this will happen. The characteristics of those transactions are much more short term, you can expect no demand coming from the agribusiness. As I said, even though with the shock with the depression, I can say, I can describe it this way. This segment tends to continue to be active. In the end, [indiscernible] and Brazil needs to be fat. And this segment has an important goal to preserve good safety for food security in this process. And for the SME, I would say that we saw some demand beginning this crisis, but much more demand to extent the transactions in less demand for money, and we expect for, for instance, for individuals, more demand coming from payroll, yes. And then we see some growth for the portfolio, but probably differently from the way we guided when we started the year.

[Operator Instructions]. Our next question comes from Nicolò Riva from Bank of America. .

Yes. Daniel. I have one question. I understand that the Congress in Brazil approved a plan for the Central Bank to purchase domestic corporate bonds. And I wanted to ask you if you would anticipate participating on this program to issue domestic bonds to be bought by the Central Bank. I guess, are there rational here in credit lower yields and increased liquidity in the Sangomar market in Brazil. And also if this changes in any way your outlook to potentially issue U.S. dollar bonds later this year? And also, any color you can have in terms of the size of this program, when it will be implemented, how long it would last? Any color would be helpful to me.

Thanks for the question. First of all, the behavior of Central Bank. Central Bank was quite fast in using all the measures to bring liquidity for the system. Certainly, reducing reserve requirements, adjusting the capital the for the system and mainly providing liquidity for the . This is one important aspect. Another thing that I think the business coming in U.S. Europe, but this is happening for the first time in Brazil, the possibility of Central Bank buying private bonds in this process. This is important also when you have more private funds in the system and certainly, when you have some shocks of liquidity in other markets that central bank doesn't have the long for them, yes. And this to provide the liquidity for the system is quite rely. In terms of participation, I would say that no, yes, there is no anticipation at all that movement that we observe in is basically what we -- as I said, it was based on the demand of the customers. Yes. Certainly, these keep different dynamics, but I think that it's early to say. We probably will need more time to see how this is going to work. To be very frank, I think that for the system is quite important to have this possibility. This attitude in other parts of the world and showed a very prudential way of managing liquidity in the system. About the second part, sorry, I forgot about the possibility of issuing bonds. Certainly, the bank is quite liquid in foreign currency. And by the way, we had some payments, yes, some transactions that was in the market. We have the [indiscernible] that will happen October this year for 1 old Style Tier 1, yes. On Brazil refunded those transactions, yes. And the funding structure of the bank is quite satisfied yes then we have certain capital markets. We have into bank markets. We have all the markets that we reached, including [indiscernible], including in the German markets, for instance, we access some pockets of liquids like should shine or things like that because we are in that low market spend. This is quite diversified source of funds. Then the bank has always analyzes those instrument dosing and how we can launch how we can manage the best price and the best conditions. Then this is now -- we always look at this. It's hard to say if we're going to do something or not, but we are taking this indication.

Okay. So to summarize, you already prefunded the call of the 8.5 curve in October, the $850 million. And at this point, you don't expect to issue in the U.S. dollar market this year?

I would say that mainly with the dislocation of the [indiscernible] that we have, it's less likely. But again, this is very live situation. We prefund it, and we don't -- we have resources to make the payment. But certainly, it's a question of opportunity. Understanding, we want to be present in the market to have our bonds being negotiated, yes, but it's a question of having the front to use it, having the usage for those funds and certain pricing. And then we are observing this, but we have nothing decided at this point.

Our next question comes from Dale Kartu from JP Morgan. .

I'm going to go back a little bit to your core equity. You have a much better performance than your peers, your private peers in this quarter. But I'm wondering how we can think about this ratio going forward in 2020? I've seen that in the presentation, you still kept the minimum 51% or 11% in January 2022, we estimate to but for this year specifically, how do you see the evolution of this ratio, considering your loan growth, considering that dividends are cut this year? How can we think about it? And what kind of surprise -- negative comprise could we see in terms of mark-to-market or Previ going through the year?

Thank you, Natalia, for the question. Yes. So again, it's hard to give a projection. We are navigating four quarters. As I said, the 11% is targeted as we always take in consideration because including in our corporate documents. For this year, as you said, we had a reduction in the payout ratio to what is established in our bylaws. Yes, then this adds more capital retention in this process, yes. The bank is quite conservative in terms of marked risk then some mark-to-market, you can expect, but depending on the market conditions, but no shocks. Something that was 1 of the detractors in the system was basically the impact of the fiscal hedging. And by the way, we have a much lower -- much smaller investment abroad. And the impact was lower for us. For the [indiscernible], certainly, we are following up this quite closely. And this is hard to give you a projection. But 1 thing is what -- and this is an important variable is how the curve will behave. To be that, frankly, it will be a surprise if we see more reduction in the long end of the curve, the long end of the curve we said we had a movement in the curve. It tends to be a little bit higher, mainly when you have more use yes then non scenarios that we are running, we are showing comfortable capital base to face our needs and still be on the base. But this is one important aspect to the way we launched capital. It's always a forward-looking approach. We have a very well-defined thresholds in our corporate governance. We project our capital on a regular basis in the next 3 years in different scenarios. And when we see some of our targets being issued, we have time in anticipation for starting taking actions to reach those targets. Good example of this was in the past when we have more leverage, and we had the implementation of deep [indiscernible] that it was challenging worldwide. And we were able to do it this in a very disciplined pace, yes. Then this is exactly what you can expect on our side.

All right. And just on the physical hedge that you had a lower impact can you just explain how exactly that works?

Pardon me. Can you say it again?

On the fiscal hedge that you have lower impact in your peers and help your capitalization. Can you just remind me how exactly to work?

Okay. Because you have a different tax treatment, for instance, the investments you have abroad you have no taxation for the tax changes. However, to hedge this position, you need to find liabilities. However, those liabilities, you have tax impact. Just roughly, let's assume that I have 100 in my investment and I hedged this position with another position at 100 and that have a change a variation of 10%. It means that mine or our valuation of the currency that are going to have a hit of 10 in my assets and my derivative of my instrument in the liability would have -- will compensate this with 10. But since you have not a synchronous in the taxation, having the liability tax. These 10 convert into 5, then we're not fully hedged. The way to address it is to give an over hedge. And the city to hedge this 100, you need to have 100 and something just for the P&L to compensate it, yes? This additional tax credit or tax impact goes against capital, yes, because you have a different treatment for how can say rate for tax credits? Yes. The situation of Banco do Brasil, we have roughly BRL 20 billion investments abroad. I [indiscernible] When we compare to the 10 major players, they have usually 4x of that. Then we have some impact going in the credentials, yes. But we tend not to have the same expansion because the level of investments we have abroad is lower. By the way, there is some changes being discussed in the [indiscernible] yes we need to observe this changing this taxation. And in doing this, this will bring some -- the same pace for assets and liabilities. And cons is effect in the P&L and the overhedging. Yes. I know that it was too technical, but what -- am I able to give all the color about these movements?

Yes, you did.

This concludes today's question-and-answer session. Mr. Daniel Maria will proceed with his concluding remarks. .

Thank you all for the attendance and for the questions. Yes, we continue available for any remaining questions. And thank you for the support. And by the way, keep safe. Thank you.

That does conclude Banco do Brasil conference call for today. As a reminder, the material used in this conference call is available on Banco do Brasil Investor Relations website. Thank you very much for your participation, and have a nice day. You may now disconnect.